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The 2012 Child Maintenance Scheme: calculating maintenance - income
After you've made an application for child maintenance under the 2012 Child Maintenance Scheme, the Child Maintenance Service (CMS) will calculate the amount of maintenance that needs to be paid.
The calculation will depend on a number of factors, including what counts as income. This page tells you more about income and what types will be included in the maintenance calculation.
In Northern Ireland, you can arrange maintenance through the Northern Ireland Child Maintenance Service.
If you want more information about the different ways you can arrange child maintenance, go to Child Maintenance Choices at www.nidirect.gov.uk.
Therefore, when the page refers to the Child Support Agency (CSA) or the Child Maintenance Service (CMS), in Northern Ireland this means the Northern Ireland Child Maintenance Service. When the page refers to Child Maintenance Options, in Northern Ireland this means Child Maintenance Choices.
What maintenance is based on
The rate of maintenance you must pay depends on your gross weekly income. Gross income is money you earn before Income Tax and National Insurance are taken off, but after occupational or personal pension scheme contributions are taken away.
What does income include?
- earnings from employed and self-employed work
- payments you get from an occupational or personal pension
- taxable benefits – Incapacity Benefit, contributory Employment and Support Allowance and contribution-based Jobseeker’s Allowance.
What counts as earnings?
Earnings include money from:
- salaries and wages
- self-employed earnings
- bonuses, commission, overtime payments, tips, royalties or fees
- holiday pay, except for holiday pay paid more than four weeks after you stopped work
- Statutory Sick Pay
- Statutory Maternity Pay
- Statutory Paternity Pay
- Statutory Adoption Pay
- overseas earnings if these are taxable in the United Kingdom.
What doesn’t count as earnings?
Gross earnings don’t include:
- expenses you have to pay for as part of your work, such as petrol you buy when you use a company car for work
- a tax-exempt allowance an employer makes to an employee
- payments in kind
- an advance of earnings or loan from your employer
- redundancy pay, but only in some cases. If you’ve received a redundancy payment, get expert advice about whether this will count as earnings
- Working Tax Credit and Child Tax Credit.
Payments you get from an occupational or private pension will count as income.
The CMS uses information from HM Revenue and Custom (HMRC) to calculate maintenance payments.
If you’re in an occupational pension scheme
Your pension contributions will have already been taken into account by your employer when they send their figures to HMRC. You don’t need to declare these contributions.
If you're in a private pension scheme
If you're employed and you pay pension contributions directly to a private pension scheme provider, they won’t have been included in the figures your employer gave to HMRC. You’ll have to declare how much you pay in pension contributions to the CMS.
If you're self-employed and pay into a private pension scheme, you should declare your pension contributions on your self-assessment tax return.
How much can you pay into a pension
There’s no limit to the amount of pension contributions that the CMS consider reasonable when they work out how much maintenance should be paid. For example, it would be reasonable to make large contributions to a pension if you’re close to retirement.
However, if you’re making excessive pension contributions this could be seen as getting rid of income to avoid paying maintenance. If you suspect the parent who should pay maintenance is doing this, you can apply to the CMS for a variation. The CMS will ask for evidence of the pension contributions and may recalculate maintenance payments.
Unearned income, such as income from savings and investments, isn’t taken into account when the CMS makes a maintenance calculation.
However if you believe the parent who should pay maintenance has substantial unearned income, you can ask for a variation of the maintenance calculation.
The CMS will ask HMRC to provide details of unearned income for the latest available tax year of the parent who should pay maintenance. However they can only work out the calculation based on taxable income. Any tax-free income, such as money from Individual Savings Accounts (ISAs), won’t be counted.
How your earnings are verified
The CMS will get financial information from HMRC about your past earnings. This is called historic income. HMRC will provide:
- PAYE end of year returns
- annual self-assessment returns if you’re self-employed.
The information HMRC provide will be from the latest year for which they have records. This will usually be for the most recent tax year. If there’s no information for that year, HMRC can supply the same information from earlier years.
Figures used to calculate the rate of maintenance are usually based on those provided by HMRC for the past tax year. For example if you make an application in January 2013, the figures will be taken from the 2011/12 tax year.
However the calculation can be based on current income if either of you can show that current income is at least 25 per cent different from the amount provided by HMRC for the past year.
Current income will also be used if HMRC can’t provide details of past income and you’re not eligible to pay the flat rate or the nil rate. Taxable benefits, such as contributory Jobseekers Allowance, are not included in this calculation because you’d be paying the flat rate of maintenance if you get those benefits.
If you’re self-employed
Current income will only be accepted if it’s for the annual period covered by most self-assessment forms. You should give evidence of your income in as the same way as it appears on a self-assessment tax form.
Your current income can be accepted over a shorter period if your business is newly-established.
If you can provide satisfactory evidence that your business has stopped trading permanently, your current income from self-employment will be nil.
If HMRC can’t provide information
If HMRC can’t provide the figures, the CMS will use information from your employer or figures you provide yourself. If none of these figures are provided, they will estimate your current income. This will be based on:
- information the CMS already have about you, or
- published government data, such as the Annual Survey of Hours and Earnings. This gives average earnings for jobs and regions.
If you get rid of income
If the CMS believe you’ve got rid of income so you can pay less maintenance, they will work out how much they think you’ve got rid of and take this amount into account when they calculate the maintenance you should pay.
If you think your ex-partner has got rid of income so they pay less maintenance, you can ask for a variation.
Ignoring income above £3,000
The maximum amount of gross weekly income that can be taken into account when the CMS calculate maintenance is £3,000. They will ignore any income over this amount.
Once you have checked out your total gross weekly income, go to: